PSF 2015: The stars are aligning for apparel from Africa

There are very few places left for the apparel industry to go - and Africa could be one of them

Africa’s potential as a primary source for the production of textiles and apparel has been a topic of discussion for several years – although turning talk into action has been slow. But if global brands, manufacturers and mills could come together and build vertical supply chains on the continent, they would set themselves up with a sourcing hub for the future.

"I would encourage you to look very seriously at Africa whether you're a brand, a manufacturer or a service provider, because the opportunity is very exciting," Mark Green, executive vice president, global supply chain, at PVH, told delegates at the annual Prime Source Forum in Hong Kong last week.

But there’s a big proviso. "Don't think that you can set up a buying office in Kenya and Ethiopia and be able to buy your product tomorrow: you can't." While there are some good factories in those countries, Green also cautions: "If you look at much of what exists today, you will not go there. That's a fact. Because they don't provide a level of service that you need."

Instead, he is urging brands, manufacturers and mills to "invest the time, the energy, the will, the money and the commitment" to build "something special [in Africa] that will be a model for others to follow".

He continues: "What we need in Africa is to have a plan, we need to have a strategy, we need to set the very best standards of compliance. We need to make sure that we're vertical so that we've got cotton growing, we've got mills, we've got apparel manufacturers, we've got tier-2 level support services – and that way we can build something that’s for the next 25 years.

"It will be sustainable, it will create wealth, it will create jobs, it will keep our businesses competitive for the next 10-15 years in a world of rising prices."

Significant transformation
Apparel giants PVH Corp and VF Corp last year undertook a joint tour of East Africa to look at the opportunities on offer in countries such as Ethiopia, Kenya and Uganda. And key to Green’s conviction that "the stars are aligned" for investment in Africa is the fact that many governments in the continent’s 54 countries have put textiles and apparel "very high on their list of priorities."

Significant transformation is also underway in the "calibre of leaders, the drive, energy and commitment [which] is totally different from what we have seen before," agrees AdanMohamed, Kenya’s cabinet secretary for industrialisation and enterprise development.

"More then ever before there is some serious alignment between the governments of Africa in advancing sectors that will provide a significant number of jobs, and investors who are also looking for opportunities where the costs are relatively lower or better than traditional markets."

Earmarking textiles and apparel as a potential driver of major economic growth has seen the Kenyan government offer incentives such as tax breaks to lure global textile firms, and setting up three special industrial zones near its ports in Mombasa, Lamu and Kisumu to support the sector.

The growing population – including an available labour force of 17m people in Kenya – also offers a huge untapped pool of inexpensive and plentiful workers for the industry. A typical sewing machine operator in Kenya would be paid $90-150 per month, the minister estimates.

And exports to the US and EU are duty-free thanks to AGOA (the African Growth and Opportunity Act) and EPA (Economic Partnership Agreements), the most recent being an EPA between the EU and the five East African Community (EAC) countries - Burundi, Kenya, Rwanda, Tanzania and Uganda.

Free trade between the East African nations makes it easier to move goods around, and "enormous" investment from the US and China in roads, railways, power and infrastructure has made these countries far more accessible than ever before.

"Not only do we have power but we have green energy - geothermal power in Kenya and hydroelectric power in Ethiopia - which is a wonderful story to tell," Green adds. "We have plenty of water also available at very inexpensive rates."

There is also potential to increase cotton production in Africa, which currently accounts for 6% of world production. 60% of the world’s uncultivated arable land is in Africa, and 80% of land in Kenya is suitable for cotton cultivation.

Most of the textiles currently used in Africa are imported, and while "we believe that for this industry to be sustainable we have to have verticality," Green acknowledges a time lag of two to five years between planting and growing cotton and setting up a mill.

"All the governments we have been talking to have been guaranteeing that goods for re-export will be duty-free, will have no taxes against them, so you will be able to bring your raw materials in, make your goods, ship them out, the only cost will be the logistics cost attached to that."

Discussions are also ongoing at government level about moving towards cotton farming on an industrial scale and lifting yields to a level comparable with China or Australia. "That work is starting, but it's not as far advanced as some of the other conversations," Green explains, adding: "If these countries can move to commercial farming you're going to see a huge dramatic increase in the viability of the region."

Current challenges
There are, of course, challenges too, including communication problems, poor infrastructure, slow border processes, and unstable economies in some African countries.

Other current issues include low levels of productivity, flexibility and capability when it comes to garment assembly, with a skew towards the most basic products. "Do I think that the level of productivity is comparable to Asia? No," the minister concedes. "Do I believe that they can rise up to the challenge once opportunities are provided? Absolutely."

Another challenge that will also need to be addressed is the prevalence of Aids and HIV in sub-Saharan Africa and the resulting issue of employee safety in factories, which might need to be addressed by factories or brands through blood borne pathogen training, safety training and education, and even making vaccines available to workers.

But perhaps the most looming issue just now is the potential expiry of AGOA in September, although even here Green is optimistic. "The signs are good for AGOA; all the indications we're getting are that it will be renewed."

He anticipates a 10-year renewal, which would be "significant," in helping to build a vertical supply chain. "Mills are very capital-intensive investments and return on investment is 8-10 years, so we need that security of a 10-year extension in AGOA to give people the confidence to invest."

Future sourcing hub
"We believe Africa will become the future sourcing hub because of the changing dynamics in Asia, the traditional home of sourcing in the apparel and textiles sector," Mohamed explains. "Those changes can only benefit Africa and the changes in Africa."

Green agrees. "In terms of the macro view of the world, as I look strategically at our industry, there are very few places to go. In China we've got continuing rising cost, increasing challenges on compliance. In Bangladesh we're struggling to get the government to self-regulate the industry, there are concerns about rising prices, [and] there's not been the ability to really grow that vertical integration that a lot of us would have liked to have seen.

"A lot of people are looking at Vietnam. We do believe [TPP] will happen, [but] it will be a longer-term opportunity. However, Vietnam is a small place and with every single one of the Chinese mills having a plan to go to Vietnam it becomes a little scary; it'll push the prices up."

Faced with these challenges, "there's no reason why a best-in-class mill in China can't take all of their expertise, all of their technology and put it into a country like Kenya or Ethiopia and train and build.

"There are tens of thousands of graduates coming out of universities every year, looking for jobs, hungry for work, so I have no doubt in my mind that the training can happen, the workforce will become as skilled and efficient as you'll see in most countries in Asia.

"But you've got to invest in it, you've got to work at it, you've got to make it happen. We have to build factories that are lean, that are compliant. We can take all the mistakes that we've learned as an industry over the years and build something special and something unique – and that is what we want to do."

Of course it won’t be easy, he agrees, but has already been proved possible in countries like China and Sri Lanka, where "we were told they would never be able to do the innovation and development."

However, "when you're behind the times you have a choice: you try to play catch-up or you leapfrog. And in Africa we've got to leapfrog."

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